11/30/2014

HistoricalBondFraud

HistoricalBondFraud

HistoricalbondsarethosebondsthatwereoncevalidobligationsofAmericanentitiesbutarenowworthlessassecurities,arequicklybecominga
favoritetoolofscamartists.Hereareseveralthingsthatyoushouldknowaboutthem:

TypesofHistoricalBondsUsedforFraud
Althoughallsortsofhistoricalbondsarecollectedandtraded,historicalrailroadbondscomprisemostofthebondsusedtoperpetratefraud.
HistoricalrailroadbondscommonlyusedbyscamartistsincludethoseissuedbytheChicago,Saginaw,andCanadaRailroadCo.,theEast
AlabamaandCincinnatiRailroadCo.,theMadRiverandLakeErieRailroadCo.,theGalveston,Houston&HendersonRailroadCo.andthe
Richmond,andYorkRiverRailroadCo.Theserailroadbondsarebutafewofthe12,000to15,000varietiesofhistoricalrailroadbondsthatare
knowntoexist.NonrailroadhistoricalbondscommonlyusedbyscamartistsincludebondsissuedbytheNoondayMiningCo.

LiesUsed
Lie:Historicalbondsarepayableingold.
Fact:Historicalbondsarenotpayableingold.
Historicalbondsarenotvalidobligations.Eveniftheywerevalidobligations,theywouldnotbepayableingoldbecausegoldclausesinbonds
issuedbefore1977areunenforceableinU.S.courts.Adamsv.BurlingtonNorthernR.R.Co.,80F.3d1377,1380(9thCir.1996)(26KTXTfile,
uploaded9/28/98)31U.S.C.5118(d)(2)(2.5KTXTfile,uploaded9/28/98).

Lie:HistoricalbondsarebackedbytheTreasuryDepartment.
Fact:Historicalbondsarenotandhaveneverbeenbackedbyus.

Whilehistoricalbondsoftenhavethewords"UnitedStatesofAmerica"printedonthem,thesereferencesweremerelytoidentifythebondsas
issuedbyentitieslocatedintheUnitedStates.Nowhereonhistoricalbondsarethereanystatementsthatthebondsareissuedorbackedbyusor
anyotherpartoftheUnitedStatesGovernment.Onlyinlimitedandwellknowncircumstanceshaveweguaranteedobligationsissuedbyprivate
parties,forexample,thebondsissuedbytheChryslerCorporationintheearly1980s.

Lie:TheTreasuryDepartmenthasestablishedafederalsinkingfundtoretirehistoricalbonds.
Fact:Thereisnofederalsinkingfundtoretirehistoricalbonds.

AsthesehistoricalbondswereneitherissuednorbackedbyusoranyotherpartoftheUnitedStatesGovernment,itwouldbepatentlyabsurdto
suggestthatwewouldestablishasinkingfundtoretirethesehistoricalbonds.

Lie:Historicalbondscanbeusedinhighyieldinvestment"tradingprogram"sanctionedbyany,some,orallthefollowingentities:theInternational
ChamberofCommerce("ICC"),theIMF,theWorldBank,theUnitedNations,theFederalReserveBoard,aFederalReserveBank,andthe
TreasuryDepartment.
Fact:Therearenosuch"tradingprograms,"andnoneoftheseentitieseversanctionsorregulatessuchprivateinvestmentactivity.Forexample,
theIMFhasissuedawarningaboutfinancialschemesmisusingitsname.

Lie:Fundsin,orsomeproceedsfrom,thesehighyieldtradingprogramsgotohumanitarianpurposesorinfrastructuredevelopmentprojectsthat
areapprovedbytheUnitedNations,theWorldBank,ortheTreasuryDepartment.
Fact:Therearenosuch"tradingprograms"or"highyieldinvestmentprograms."
Thescamartist'suseofhumanitarianorinfrastructuredevelopmentthemeisatrickto(1)maketheinvestorwanttobelievethatthetrading
programsarerealand(2)maketheinvestorbelievethattheycouldbehelpingaThirdWorldcountrybyforkingovertheirmoney.

Lie:Historicalbondtradingprogramsyieldhighratesofreturnthroughthebuyingandsellingof"debenture"or"mediumtermnotes"supposedly
issuedby"prime"or"top"Europeanor"World"banks.
Fact:OfficialsofleadingEuropeanbanks,includingBarclaysBank,havedeniedanyparticipationinsuchprogramsandthereisnoevidencethat
themarketforsuchinstrumentsexistsasdescribedbyscamartists.

TrueValuesofHistoricalBonds
Historicalbondsareworthlessassecurities.NoneofthehistoricalUnitedStatesrailroadbondsarepayablebytoday'ssuccessorrailroadssuch
asCSX,NorfolkSouthernandUnionPacific.Instead,historicalbondsonlyhavevalueascollector'sitems.A1995publication,StocksandBonds
ofNorthAmericanRailroads:CollectorsGuidewithValues(oneofmanyavailablepublications)assessedthecollector'svalueofthehistorical
railroadbondslistedatbetween$25and$700each.Moreover,therearemanysitesontheInternetthatyoucanvisittoevaluatethecollector's
valueofanyparticularbond.

BogusThirdPartyValuationstoTrickInvestors

http://www.treasury.gov/about/organizationalstructure/ig/Pages/Scams/HistoricalBondFraud.aspx

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11/30/2014

HistoricalBondFraud

Scamartistsaresellinghistoricalbondstounsophisticatedinvestorsatinflatedpricesfarexceedingtheirfairvalueascollectibles.Theyoftenuse
thirdpartyvaluations,whichstatethatthebondsareworthmillionsorbillionsofdollarseach.Thesevaluationsorauthentications,whichareoften
referredtoas"hypothecated"or"hypothetical,"arebogus.Atypicalvaluation(104KJPGfile,fileuploaded1/24/98)willfalselyoverstatethevalue
ofthesebondsbyassumingerroneouslythat,despitetheunenforceabilityofthegoldclausescontainedinthebonds,andthedefunctand
bankruptstatusofmostofthebonds'issuers,somepersonorentityisobligatedtoredeemthebondsingoldbullion.SeeSECv.GeraldA.
Dobbinsetal.,No.98229
(C.D.Cal.May19,1998)(findingsonordertoshowcausere:preliminaryinjunctionvaluationsofhistoricalbonds
heldtobe"misstatements")(8.5KTXTfile,uploaded9/25/98).
Scamartistsusingsuchvaluationsmayalsomakethefalseassertionthatwhileperhapsnotpayabletodayingoldorinmoney,thebondsare
usedinhighyieldtradingprogramsintheUnitedStates,offshoreandinEurope.Asstatedabove,therearenosuchtradingprograms.Inseveral
cases,thethirdpartiesissuingthevaluationsappeartobeworkinginconjunctionwiththescamartists.Allthesefalseassertionshavebeenused
todefraudinvestorsintopayingasmuchas$150,000forhistoricalbondsthatregularlytradefor$25.

Chicago,SaginawandCanadaRailroadCo.Bonds
AhistoricalbondfraudcaseinpointinvolvesbondsissuedbytheChicago,SaginawandCanadaRailroadCo.(CS&C).Ithasbeenallegedthat
thesesecuritiesarepayablebyusingold.Weneitherissuedthesebonds,noraretheypayableingold,backed,orguaranteedbyusoranyother
partoftheUnitedStatesGovernment.In1873,CS&Cissued5,500thirtyyeargoldbackedbearerbonds,payingsevenpercentinteresttofinance
constructionofaproposedrailroad.ClicktoviewafullsizeimageofaCS&Cbond(99KJPGfile,uploaded1/24/98).

CS&Cscreditorsforceditintobankruptcyin1876andapredecessorofCSXTransportation,Inc.("CSX")purchaseditsassets.CSXspredecessor
didnotassumeanyofCS&Csoutstandingdebt,includingtherailroadbonds.Allclaimstomoneydueunderthebonds,whichhadafacevalueof
$1,000each,wereresolved112yearsagointhe1876bankruptcyproceeding.Atthattime,investorspresentedtheirbondsforpaymentoutof
fundsfromtheforeclosuresaleandreceivedadistributionamountingtolessthan25centsonthedollar.Afterthebankruptcyproceeding,the
bondsremainedincourtarchivesuntiltheywerediscoveredinthebasementofafederalbuilding.AmuseuminGrandRapids,Michigan,
packagedthebondswithotherhistoricalinformationaboutthisrailroadforsaleascollector'sitemsfor$29.95each.Despitewhatabogus
valuation(104KJPGfile,fileuploaded1/24/98)mightclaimaboutCS&Cbonds,thebondshavenovalueotherthanascollectiblememorabilia,
sinceCSXhasdisclaimedanyliabilityforredemptionofthesebonds,andtheyaremostcertainlynotpayableingold.SeeAdams
(26KTXT
file,uploaded9/28/98)31U.S.C.5118(d)(2)
(2.5KTXTfile,uploaded9/28/98).

CourtshaveheldthattheCS&Cbondshaveonlynominalvalueascollectibles.

http://www.treasury.gov/about/organizationalstructure/ig/Pages/Scams/HistoricalBondFraud.aspx

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